Economy

‘Solve governance issues to improve FDI inflows'

Vishwanath Kulkarni New Delhi | Updated on April 27, 2011

Tata Steel Vice-Chairman B Muthuraman.   -  The Hindu





It took almost six years for Tata Steel to start construction its new greenfield project in Orissa, says Vice-Chairman, Mr B. Muthuraman. Issues relating to regulatory clearances and land acquisition are delaying new projects, he opines.

In a chat with Business Line, Mr Muthuraman, who recently took over as the President of Confederation of Indian Industry, says that the image of India has taken a beating due to the scams that have surfaced recently. Better governance and changes in regulatory mechanisms are needed to bring back investor confidence, he adds.

Edited excerpts:

On slowdown in investments

We at CII are a little worried that investment flows are decreasing. We are suggesting to the Government that some 100 mega projects, which have potential to generate huge employment, need to be picked up and fast-tracked to ensure that the GDP growth rate is maintained. Further, the Government should not increase the cost of borrowing to make sure that investment does not go down further. We need to improve the perception of the country and solve governance issues to improve the FDI inflows.

On rising inflation and monetary policy

Monetary policy is a temporary measure to contain inflation. Government should look beyond tweaking monetary policy to contain inflation. The real measure is to be more competitive, invest and produce more, and resolve issues relating to food supply chain and improve agriculture productivity.

The cost of borrowing should be brought down. If it is not possible, it should stay at the current level. Interest rates have been hiked by 200 basis points in the past one year. Any further increase will hurt growth and investment flows.

On the impact of recent scams on India's image

The perception of India abroad has had a dent because of recent scams. We have to make sure that the governance is better and laws are made simpler, transparent and open. We at CII have started a Governance Council headed by Mr Adi Godrej. It will come out with a code of conduct for our member companies by the end of the year.

On transparency in natural resource pricing

We must have clear laws on how mineral resources are to be allocated. There should be clarity on the criteria for allocation. Though there is no one view on that, it has to be debated and laws have to be made. Once the laws are made, the violators should be punished. CII is in discussion with the Committee headed by former finance secretary, Mr Ashok Chawla, on pricing of natural resources.

On mineral exports, especially iron ore

India does not have enough minerals for it to export. I am not in favour of exports. With a population of 1.2 billion, India has to produce some 500 million tonnes of steel one day. However, it has only 25 billion tonnes of iron ore.

India cannot afford to export iron ore. We have been telling the Government not to export iron ore. By increasing the export duty recently, the Government has taken the right step.

On regulatory set-up

Complexities of laws are an issue with overseas investors. The present regulatory set-up is a dampener to attract investments. For example, new capacity addition in steel is not happening because of issues relating to obtaining required clearances, land acquisition and land demarcation. It took almost six years for us at Tata Steel to start work on the Greenfield project in Orissa. Projects of Posco and Arcelor Mittal and a lot of other projects are held up due to delays in regulatory clearances.

Published on April 27, 2011

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